<PAGE>
PAINEWEBBER
GROWTH & INCOME FUND
RECENT PERFORMANCE RESULTS (UNAUDITED)
<TABLE>
<CAPTION>
NET ASSET VALUE TOTAL RETURN/1/
-------------------------- -----------------------------
12 MONTHS 6 MONTHS
08/31/95 02/28/95 08/31/94 ENDED 08/31/95 ENDED 08/31/95
- ------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Class A Shares $22.52 $19.15 $20.43 18.30% 17.54%
- ------------------------------------------------------------------------
Class B Shares 22.37 19.10 20.37 17.38 17.12
- ------------------------------------------------------------------------
Class D Shares 22.43 19.15 20.42 17.37 17.07
- ------------------------------------------------------------------------
</TABLE>
Performance Summary Class A Shares
<TABLE>
<CAPTION>
NET ASSET VALUE
---------------- CAPITAL GAINS TOTAL
PERIOD COVERED BEGINNING ENDING DISTRIBUTED DIVIDENDS PAID RETURN/1/
- ----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
12/20/83 - 12/31/84 $12.65 $13.21 -- $1.0800 13.72%
- ----------------------------------------------------------------------------
1985 13.21 14.97 $0.1950 0.8850 22.36
- ----------------------------------------------------------------------------
1986 14.97 15.04 1.1380 0.6830 12.68
- ----------------------------------------------------------------------------
1987 15.04 12.05 2.3027 0.7366 (3.16)
- ----------------------------------------------------------------------------
1988 12.05 13.67 -- 0.5120 17.83
- ----------------------------------------------------------------------------
1989 13.67 16.32 0.1675 0.5178 24.59
- ----------------------------------------------------------------------------
1990 16.32 15.85 -- 0.3030 (1.01)
- ----------------------------------------------------------------------------
1991 15.85 19.26 -- 0.0985 22.15
- ----------------------------------------------------------------------------
1992 19.26 21.74 -- 0.2432 3.90
- ----------------------------------------------------------------------------
1993 21.74 20.86 0.0310 0.2818 (2.59)
- ----------------------------------------------------------------------------
1994 20.86 18.18 1.2111 0.2417 (5.87)
- ----------------------------------------------------------------------------
01/01/95 - 08/31/95 18.18 22.52 -- -- 23.87
- ----------------------------------------------------------------------------
Totals: $5.0453 $5.5826
- ----------------------------------------------------------------------------
CUMULATIVE TOTAL RETURN AS OF
08/31/95: 252.40%
- ----------------------------------------------------------------------------
</TABLE>
Performance Summary Class B Shares
<TABLE>
<CAPTION>
NET ASSET VALUE
---------------- CAPITAL GAINS TOTAL
PERIOD COVERED BEGINNING ENDING DISTRIBUTED DIVIDENDS PAID RETURN/1/
- ----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
07/01/91 - 12/31/91 $18.04 $21.14 -- $0.1074 17.85%
- ----------------------------------------------------------------------------
1992 21.14 21.69 -- 0.0992 3.09
- ----------------------------------------------------------------------------
1993 21.69 20.82 $0.0310 0.1193 (3.31)
- ----------------------------------------------------------------------------
1994 20.82 18.15 1.2111 0.0768 (6.62)
- ----------------------------------------------------------------------------
01/01/95 - 08/31/95 18.15 22.37 -- -- 23.25
- ----------------------------------------------------------------------------
Totals: $1.2421 $0.4027
- ----------------------------------------------------------------------------
CUMULATIVE TOTAL RETURN AS OF
08/31/95: 35.20%
- ----------------------------------------------------------------------------
Performance Summary Class D Shares
<CAPTION>
NET ASSET VALUE
---------------- CAPITAL GAINS TOTAL
PERIOD COVERED BEGINNING ENDING DISTRIBUTED DIVIDENDS PAID RETURN/1/
- ----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
07/02/92 - 12/31/92 $19.96 $21.75 -- $0.1160 9.58%
- ----------------------------------------------------------------------------
1993 21.75 20.87 $0.0310 0.1308 (3.30)
- ----------------------------------------------------------------------------
1994 20.87 18.20 1.2111 0.0756 (6.61)
- ----------------------------------------------------------------------------
01/01/95 - 08/31/95 18.20 22.43 -- -- 23.24
- ----------------------------------------------------------------------------
Totals: $1.2421 $0.3224
- ----------------------------------------------------------------------------
CUMULATIVE TOTAL RETURN AS OF
08/31/95: 21.96%
- ----------------------------------------------------------------------------
</TABLE>
/1/Figures assume reinvestment of all dividends and capital gains distributions
at net asset value on the payable dates, and do not include sales charges;
results for Class A and Class B shares would be lower if sales charges were
included.
1
<PAGE>
PAINEWEBBER
GROWTH FUND
RECENT PERFORMANCE RESULTS (UNAUDITED)
<TABLE>
<CAPTION>
NET ASSET VALUE TOTAL RETURN/1/
-------------------------- -----------------------------
12 MONTHS 6 MONTHS
08/31/95 02/28/95 08/31/94 ENDED 08/31/95 ENDED 08/31/95
- ------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Class A Shares $22.27 $19.21 $20.04 11.28% 15.93%
- ------------------------------------------------------------------------
Class B Shares 21.53 18.65 19.53 10.40 15.44
- ------------------------------------------------------------------------
Class D Shares 21.68 18.78 19.67 10.37 15.44
- ------------------------------------------------------------------------
</TABLE>
Performance Summary Class A Shares
<TABLE>
<CAPTION>
NET ASSET VALUE
---------------- CAPITAL GAINS TOTAL
PERIOD COVERED BEGINNING ENDING DISTRIBUTED DIVIDENDS PAID RETURN/1/
- ----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
03/18/85 - 12/31/85 $ 9.15 $10.55 -- $0.1275 16.87%
- ----------------------------------------------------------------------------
1986 10.55 10.86 $0.4064 0.1042 7.64
- ----------------------------------------------------------------------------
1987 10.86 9.81 1.4051 0.0847 4.34
- ----------------------------------------------------------------------------
1988 9.81 11.87 -- 0.1011 22.05
- ----------------------------------------------------------------------------
1989 11.87 14.79 1.1520 -- 34.27
- ----------------------------------------------------------------------------
1990 14.79 12.98 0.4625 0.1625 (7.72)
- ----------------------------------------------------------------------------
1991 12.98 18.53 0.6003 0.0072 47.61
- ----------------------------------------------------------------------------
1992 18.53 18.66 0.6235 -- 4.15
- ----------------------------------------------------------------------------
1993 18.66 21.14 1.0734 -- 19.17
- ----------------------------------------------------------------------------
1994 21.14 18.81 0.0258 -- (10.90)
- ----------------------------------------------------------------------------
01/01/95 - 08/31/95 18.81 22.27 -- -- 18.39
- ----------------------------------------------------------------------------
Totals: $5.7490 $0.5872
- ----------------------------------------------------------------------------
CUMULATIVE TOTAL RETURN AS OF
08/31/95: 283.63%
- ----------------------------------------------------------------------------
</TABLE>
Performance Summary Class B Shares
<TABLE>
<CAPTION>
NET ASSET VALUE
---------------- CAPITAL GAINS TOTAL
PERIOD COVERED BEGINNING ENDING DISTRIBUTED DIVIDENDS PAID RETURN/1/
- ----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
07/01/91 - 12/31/91 $15.63 $18.47 $0.6003 $0.0037 22.18%
- ----------------------------------------------------------------------------
1992 18.47 18.44 0.6235 -- 3.30
- ----------------------------------------------------------------------------
1993 18.44 20.71 1.0734 -- 18.26
- ----------------------------------------------------------------------------
1994 20.71 18.28 0.0258 -- (11.61)
- ----------------------------------------------------------------------------
01/01/95 - 08/31/95 18.28 21.53 -- -- 17.78
- ----------------------------------------------------------------------------
Totals: $2.3230 $0.0037
- ----------------------------------------------------------------------------
CUMULATIVE TOTAL RETURN AS OF
08/31/95: 55.38%
- ----------------------------------------------------------------------------
Performance Summary Class D Shares
<CAPTION>
NET ASSET VALUE
---------------- CAPITAL GAINS TOTAL
PERIOD COVERED BEGINNING ENDING DISTRIBUTED DIVIDENDS PAID RETURN/1/
- ----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
07/02/92 - 12/31/92 $17.04 $18.57 $0.6235 -- 12.73%
- ----------------------------------------------------------------------------
1993 18.57 20.85 1.0734 -- 18.19
- ----------------------------------------------------------------------------
1994 20.85 18.41 0.0258 -- (11.58)
- ----------------------------------------------------------------------------
01/01/95 - 08/31/95 18.41 21.68 -- -- 17.76
- ----------------------------------------------------------------------------
Totals: $1.7227 --
- ----------------------------------------------------------------------------
CUMULATIVE TOTAL RETURN AS OF
08/31/95: 38.73%
- ----------------------------------------------------------------------------
</TABLE>
/1/Figures assume reinvestment of all dividends and capital gains distributions
at net asset value on the payable dates, and do not include sales charges;
results for Class A and Class B shares would be lower if sales charges were
included.
2
<PAGE>
PAINEWEBBER
GROWTH & INCOME FUND
PORTFOLIO OF INVESTMENTS AUGUST 31, 1995
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
--------- -----------
COMMON STOCKS - 93.48%
<S> <C>
Aerospace - 3.29%
169,500 Lockheed Martin Corporation............................ $10,318,312
68,200 McDonnell Douglas Corporation.......................... 5,473,050
-----------
15,791,362
-----------
Agriculture, Food - 4.28%
89,900 Campbell Soup Company.................................. 4,112,925
188,700 Con Agra Incorporated.................................. 7,147,013
124,300 Philip Morris Companies Incorporated................... 9,275,887
-----------
20,535,825
-----------
Air Transport - 0.98%
63,900 AMR Corporation Delaware*.............................. 4,504,950
15,000 Qantas Airways Limited*................................ 249,375
-----------
4,754,325
-----------
Aluminum - 1.19%
100,000 Aluminum Company of America............................ 5,712,500
-----------
Banks - 6.76%
100,000 Bank of New York Incorporated.......................... 4,350,000
50,000 Chase Manhattan Corporation............................ 2,875,000
100,000 Citicorp............................................... 6,637,500
20,000 First Empire State Corporation......................... 3,660,000
75,000 Morgan (J.P.) & Company Incorporated................... 5,465,625
153,600 NationsBank Corporation................................ 9,427,200
-----------
32,415,325
-----------
Beverages - 0.91%
96,000 Pepsico Incorporated................................... 4,344,000
-----------
Business Machines - 8.17%
116,400 Cirrus Logic Incorporated*............................. 6,343,800
100,000 Cisco Systems, Inc.*................................... 6,562,500
100,000 Compaq Computer Corporation*........................... 4,775,000
262,900 EMC Corporation*....................................... 5,389,450
100,000 International Business Machines Corporation............ 10,337,500
100,000 Sun Microsystems Incorporated*......................... 5,787,500
-----------
39,195,750
-----------
Chemicals - 2.09%
50,000 Ashland Incorporated................................... 1,637,500
80,000 DuPont (EI) de Nemours & Company....................... 5,230,000
50,000 IMC Global Incorporated................................ 3,162,500
-----------
10,030,000
-----------
Construction - 0.85%
150,000 USG Corporation*....................................... 4,068,750
-----------
Consumer Durables - 0.35%
32,300 Premark International Incorporated..................... 1,691,713
-----------
Drugs, Medicine - 9.08%
108,900 Abbott Laboratories.................................... 4,219,875
</TABLE>
3
<PAGE>
PAINEWEBBER
GROWTH & INCOME FUND
PORTFOLIO OF INVESTMENTS (CONTINUED) AUGUST 31, 1995
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
--------- -----------
COMMON STOCKS - (CONTINUED)
Drugs, Medicine -- (concluded)
<S> <C>
53,700 Allergan Incorporated.................................. $ 1,631,138
67,300 Bristol-Myers Squibb Company........................... 4,618,462
125,000 Johnson & Johnson...................................... 8,625,000
100,000 Lilly (Eli) & Company.................................. 8,187,500
293,850 Mylan Labs Incorporated................................ 6,721,819
100,000 Pfizer Incorporated.................................... 4,937,500
102,800 Smithkline Beecham, PLC................................ 4,600,300
-----------
43,541,594
-----------
Electric Utilities - 2.48%
84,400 DPL Incorporated....................................... 1,877,900
151,300 Duke Power Company..................................... 6,146,562
100,000 FPL Group Incorporated................................. 3,887,500
-----------
11,911,962
-----------
Electronics - 6.31%
106,200 AMP Incorporated....................................... 4,314,375
45,500 Avnet Incorporated..................................... 2,343,250
100,000 Intel Corporation...................................... 6,137,500
134,100 Loral Corporation...................................... 7,341,975
84,300 Raytheon Company....................................... 6,817,762
100,000 VLSI Technology Incorporated*.......................... 3,300,000
-----------
30,254,862
-----------
Gas Utilities - 0.52%
100,000 Panhandle Eastern Corporation.......................... 2,500,000
-----------
Healthcare (Non-drug) - 3.12%
88,000 Apria Healthcare Group Incorporated*................... 2,464,000
106,300 Becton Dickinson & Company............................. 5,992,662
39,600 Medtronic Incorporated................................. 3,737,250
136,600 Ventritex Incorporated*................................ 2,766,150
-----------
14,960,062
-----------
Hotels, Restaurants - 0.90%
125,000 Mirage Resorts Incorporated*........................... 4,296,875
-----------
International Oil - 3.62%
155,000 Chevron Corporation.................................... 7,498,125
60,500 Mobil Corporation...................................... 5,762,625
63,700 Texaco Incorporated.................................... 4,124,575
-----------
17,385,325
-----------
Life Insurance - 0.78%
100,600 Equitable of Iowa Companies............................ 3,747,350
-----------
Miscellaneous Finance - 0.78%
34,000 American Express Company............................... 1,372,750
100,000 Comdata Holdings Corporation*.......................... 2,387,500
-----------
3,760,250
-----------
</TABLE>
4
<PAGE>
PAINEWEBBER
GROWTH & INCOME FUND
PORTFOLIO OF INVESTMENTS (CONTINUED) AUGUST 31, 1995
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
--------- -----------
COMMON STOCKS - (CONTINUED)
<S> <C>
Miscellaneous Mining, Metals - 0.47%
40,000 Potash Corporation Saskatchewan Inc.................... $ 2,275,000
-----------
Mortgage Financing - 0.61%
50,000 Green Tree Financial Corporation....................... 2,912,500
-----------
Motor Vehicles - 0.71%
173,600 Fleetwood Enterprises Incorporated..................... 3,406,900
-----------
Other Insurance - 5.46%
112,600 AFLAC Incorporated..................................... 4,602,525
100,971 Allstate Corporation................................... 3,420,393
85,200 American International Group Incorporated.............. 6,869,250
17,000 ITT Corporation........................................ 2,033,625
170,700 St. Paul Companies Incorporated........................ 9,260,475
-----------
26,186,268
-----------
Paper - 1.93%
70,100 Champion International Corporation..................... 3,969,412
58,400 Scott Paper Company.................................... 2,708,300
58,100 Westvaco Corporation................................... 2,563,663
-----------
9,241,375
-----------
Producers Goods - 15.46%
50,000 AGCO Corporation....................................... 2,431,250
119,600 American Brands Incorporated........................... 5,023,200
70,600 Caterpillar Incorporated............................... 4,739,025
50,000 Deere & Company........................................ 4,275,000
145,000 Donaldson Incorporated................................. 3,679,375
90,500 Dover Corporation...................................... 7,217,375
100,100 DSC Communications Corporation*........................ 5,255,250
106,500 Emerson Electric Company............................... 7,601,437
140,100 Federal Signal Corporation............................. 3,029,663
42,400 General Electric Company............................... 2,496,300
100,000 INDRESCO Incorporated*................................. 1,675,000
100,000 Material Sciences Corporation*......................... 1,925,000
144,300 Pentair Incorporated................................... 6,565,650
125,000 Textron Incorporated................................... 8,562,500
39,445 United States Robotics Corporation*.................... 5,532,161
50,000 United Technologies Corporation........................ 4,168,750
-----------
74,176,936
-----------
Publishing - 1.24%
185,900 Reynolds & Reynolds Company, Class A................... 5,972,038
-----------
Railroads, Transit - 2.10%
150,000 Conrail Inc. .......................................... 10,087,500
-----------
Retail (Food) - 1.63%
176,300 Albertsons Incorporated................................ 5,619,563
75,000 American Stores Company................................ 2,203,125
-----------
7,822,688
-----------
</TABLE>
5
<PAGE>
PAINEWEBBER
GROWTH & INCOME FUND
PORTFOLIO OF INVESTMENTS (CONTINUED) AUGUST 31, 1995
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
--------- ------------
COMMON STOCK - (CONCLUDED)
<S> <C>
Retail (All Other) - 3.80%
50,000 Borders Group, Inc.*.................................. $ 1,012,500
209,000 Rite Aid Corporation.................................. 5,852,000
158,919 Sears, Roebuck & Company.............................. 5,145,003
100,000 Tandy Corporation..................................... 6,212,500
------------
18,222,003
------------
Services - 3.23%
55,800 BMC Software Incorporated*............................ 2,378,475
138,400 Cadence Design Systems Incorporated*.................. 5,017,000
43,000 Computer Associates International Incorporated........ 2,988,500
135,400 HealthCare COMPARE Corporation*....................... 5,094,425
------------
15,478,400
------------
Telephone, Telegraph - 0.38%
100,000 NYNEX CableComms Group PLC*........................... 1,806,250
------------
Total Common Stocks (cost - $370,380,437)........................ 448,485,688
------------
PREFERRED STOCK - 1.76%
Life Insurance - 1.65%
150,000 American General Delaware Llc......................... 7,950,000
------------
Paper - 0.11%
10,000 International Paper Capital Trust+.................... 470,000
------------
Total Preferred Stock (cost - $8,000,000)........................ 8,420,000
------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT MATURITY INTEREST
(000) DATES RATES
--------- ------------------- --------------
CORPORATE BONDS - 3.54%
<S> <C> <C> <C>
Cosmetics - 0.72%
$ 3,500 Alberto Culver Company+. 06/30/06 5.500% 3,465,000
----------
Electronics - 0.43%
2,000 Sanmina Corporation+.... 08/15/02 5.500 2,050,000
----------
Mortgage Financing - 0.49%
2,400 Developers Diversified
Realty Company......... 08/15/99 7.000 2,364,000
----------
Pollution Control - 0.81%
4,000 Browning-Ferris
Industries+............ 07/18/05 6.750 3,940,000
----------
Producers Goods - 0.64%
3,000 Cooper Industries
Incorporated+.......... 01/01/15 7.050 3,060,000
----------
Retail (All Other) - 0.45%
2,500 Baker (J.) Incorporated. 06/01/02 7.000 2,125,000
----------
Total Corporate Bonds (cost -
$17,083,160)....................... 17,004,000
----------
U.S. GOVERNMENT OBLIGATIONS - 5.81%
28,000 United States Treasury
Bills (cost -
$27,882,069)........... 09/21/95 - 10/19/95 5.405 to 5.425@ 27,882,123
----------
</TABLE>
6
<PAGE>
PAINEWEBBER
GROWTH & INCOME FUND
PORTFOLIO OF INVESTMENTS (CONCLUDED) AUGUST 31, 1995
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT MATURITY INTEREST
(000) DATE RATE VALUE
--------- -------- -------- ------------
REPURCHASE AGREEMENT - 1.46%
<S> <C> <C> <C>
$ 6,995 Repurchase Agreement dated
08/31/95, with Nomura Securities
International, Inc.,
collateralized by $6,940,000
U.S. Treasury Note, 7.500% due
01/31/97; proceeds: $6,996,127
(cost - $6,995,000)............. 09/01/95 5.800% $ 6,995,000
------------
Total Investments (cost - $430,340,666) -
106.05%.................................... 508,786,811
Liabilities in excess of other assets -
(6.05)%.................................... (29,038,935)
------------
Net Assets - 100.00%........................ $479,747,876
============
</TABLE>
- -------
*Non-income producing security
+ Security exempt from registration under Rule 144A of the Securities Act of
1933. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers.
@ Yield to maturity
See accompanying notes to financial statements
7
<PAGE>
PAINEWEBBER
GROWTH FUND
PORTFOLIO OF INVESTMENTS AUGUST 31, 1995
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
--------- ------------
COMMON STOCKS - 89.17%
<C> <S> <C>
Aerospace - 0.16%
125,000 Kellstrom Industries, Inc.*........................... $ 625,000
------------
Agriculture, Food - 0.12%
168,000 Lincoln Snacks Co.*................................... 462,000
------------
Air Transport - 0.06%
15,000 Qantas Airways Limited*............................... 249,450
------------
Apparel, Textiles - 0.77%
56,736 Belding Heminway Company, Inc.*....................... 290,772
175,000 Norwood Promotional Products, Inc.*................... 2,712,500
------------
3,003,272
------------
Banks - 2.48%
90,000 Chase Manhattan Corporation........................... 5,175,000
60,000 Comerica Inc. ........................................ 2,137,500
90,000 Synovus Financial Corp................................ 2,295,000
------------
9,607,500
------------
Beverages - 1.49%
90,000 The Coca Cola Company................................. 5,782,500
------------
Business Machines - 3.90%
20,000 C-Cube Microsystems Inc.*............................. 860,000
105,000 Cisco Systems, Inc.*.................................. 6,890,625
100,000 EMC Corporation*...................................... 2,050,000
10,000 Hewlett Packard Co. .................................. 800,000
55,000 Seagate Technology, Inc.*............................. 2,433,750
25,000 Silicon Graphics, Inc.*............................... 1,056,250
50,000 Western Digital Corporation*.......................... 1,031,250
------------
15,121,875
------------
Chemicals - 2.71%
35,000 Air Products & Chemicals, Inc. ....................... 1,876,875
132,000 Sealed Air Corporation*............................... 6,963,000
75,000 The Scotts Company, Class A*.......................... 1,687,500
------------
10,527,375
------------
Consumer Durables - 0.39%
130,800 The Forschner Group, Inc.*............................ 1,520,550
------------
Drugs, Medicine - 6.38%
43,819 Advanced Therapeutic Systems Ltd*..................... 1,199,545
64,900 Columbia Labs Incorporated*........................... 563,819
52,500 Elan Corporation, PLC ADS*............................ 2,060,625
60,000 Forest Laboratories, Inc.*............................ 2,685,000
200,000 North American Vaccine Inc.*.......................... 2,025,000
100,000 R.P. Scherer Corp.*................................... 4,300,000
172,000 Teva Pharmaceutical Industries Ltd., ADS.............. 6,514,500
130,000 Watson Pharmaceuticals, Inc.*......................... 5,378,750
------------
24,727,239
------------
</TABLE>
8
<PAGE>
PAINEWEBBER
GROWTH FUND
PORTFOLIO OF INVESTMENTS (CONTINUED) AUGUST 31, 1995
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
--------- ------------
COMMON STOCKS - (CONTINUED)
<S> <C>
Electronics - 7.35%
100,000 Amphenol Corporation, Class A*........................ $ 2,450,000
283,500 Belden, Inc........................................... 7,867,125
12,500 CP Clare Corporation*................................. 300,000
30,000 Emerson Electric Co. ................................. 2,141,250
39,500 Intel Corporation..................................... 2,424,313
200,000 Jabil Circuit Incorporated*........................... 2,700,000
135,000 Lattice Semiconductor Corporation*.................... 4,438,125
33,500 Micron Technology Incorporated........................ 2,575,312
175,000 Richey Electronics Incorporated*...................... 1,356,250
45,000 Thermo Instrument Systems Inc.*....................... 1,153,125
50,000 Veeco Instruments Inc.*............................... 1,125,000
------------
28,530,500
------------
Forest Products - 0.28%
125,000 Universal Forest Products Inc......................... 1,093,750
------------
Healthcare (Non-drug) - 3.07%
160,000 Humana Inc. .......................................... 2,920,000
88,000 Phycor Incorporated................................... 3,674,000
70,000 Sunrise Medical Inc.*................................. 1,811,250
187,854 VISX, Incorporated*................................... 3,498,781
------------
11,904,031
------------
Hotels, Restaurants - 2.39%
170,000 Hospitality Franchise Systems, Inc.*.................. 7,968,750
100,000 Rio Hotel & Casino, Inc.*............................. 1,300,000
------------
9,268,750
------------
Iron & Steel - 1.02%
42,000 Easco Incorporated.................................... 504,000
220,000 Northwestern Steel & Wire Company*.................... 2,145,000
130,000 Olympic Steel, Inc.*.................................. 1,316,250
------------
3,965,250
------------
Leisure, Luxury - 2.01%
85,000 Anthony Inds, Inc..................................... 1,710,625
220,000 Marker International*................................. 1,870,000
229,500 Rawlings Sporting Goods Company, Inc.*................ 2,151,562
79,100 Sports Club Incorporated.............................. 360,894
60,000 SweetWater, Inc.*..................................... 240,000
80,000 Syratech Corporation*................................. 1,480,000
------------
7,813,081
------------
</TABLE>
9
<PAGE>
PAINEWEBBER
GROWTH FUND
PORTFOLIO OF INVESTMENTS (CONTINUED) AUGUST 31, 1995
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
--------- ------------
COMMON STOCKS - (CONTINUED)
<C> <S> <C>
Life Insurance - 0.34%
35,000 Equitable of Iowa Companies........................... $ 1,303,750
------------
Media - 13.69%
137,000 British Sky Broadcasting Group, PLC*.................. 4,349,750
115,000 Cinar Films Inc.*..................................... 1,293,750
105,000 Comcast Corporation, Class A.......................... 2,231,250
257,500 Comcast Corporation, Class A Special.................. 5,504,062
25,000 Comcast UK Cable Partners Ltd.*....................... 392,188
30,000 General Instruments Corporation*...................... 1,095,000
15,000 Glenayre Technologies, Inc.*.......................... 978,750
36,000 Infinity Broadcasting Corporation*.................... 1,291,500
80,000 Jacor Communications, Inc.*........................... 1,330,000
25,000 Renaissance Communications Corp.*..................... 925,000
53,125 Saga Communications, Inc.*............................ 903,125
390,000 Savoy Pictures Entertainment, Inc.*................... 3,510,000
225,000 Tele Communications Incorporated New*................. 4,162,500
20,000 Tele Communications International Incorporated*....... 312,500
56,250 Tele Communications Liberty Media Group*.............. 1,494,141
190,000 The News Corporation Limited.......................... 3,847,500
188,000 Time Warner Inc. ..................................... 7,919,500
15,000 Tribune Company....................................... 1,005,000
40,000 United International Holdings Inc., Class A*.......... 715,000
174,095 Viacom Inc., Class B*................................. 8,465,369
40,000 Young Broadcasting Inc., Class A*..................... 1,380,000
------------
53,105,885
------------
Miscellaneous Mining, Metals - 1.15%
70,000 Madeco S.A............................................ 1,601,250
50,000 Potash Corporation of Saskatchewan Inc. .............. 2,843,750
------------
4,445,000
------------
Mortgage Financing - 3.86%
157,500 Countrywide Credit Industries, Inc. .................. 3,465,000
79,000 Federal Home Loan Mortgage Corporation................ 5,075,750
67,500 Federal National Mortgage Association................. 6,437,813
------------
14,978,563
------------
Oil Service - 0.41%
70,000 Camco International Inc............................... 1,592,500
------------
Other Insurance - 0.88%
150,000 PennCorp Financial Group, Inc......................... 3,412,500
------------
Photographic, Optical - 0.68%
430,000 Noel Group, Inc.*..................................... 2,633,750
------------
</TABLE>
10
<PAGE>
PAINEWEBBER
GROWTH FUND
PORTFOLIO OF INVESTMENTS (CONTINUED) AUGUST 31, 1995
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
--------- ------------
COMMON STOCKS - (CONTINUED)
<C> <S> <C>
Pollution Control - 0.58%
105,000 Republic Waste Industries Inc.*....................... $ 2,231,250
------------
Producers Goods - 3.09%
200,000 Champion Road Machinery Limited....................... 1,856,250
45,000 Fisher Scientific International Inc. ................. 1,468,125
40,000 Kaydon Corporation.................................... 1,220,000
110,250 Mark IV Industries Inc................................ 2,453,062
150,000 Microcom Inc.*........................................ 3,000,000
90,000 Pall Corporation...................................... 1,968,750
------------
11,966,187
------------
Railroads, Transit - 3.25%
72,500 Burlington Northern Inc............................... 5,020,625
75,000 Conrail Inc........................................... 5,043,750
117,900 Railtex Inc.*......................................... 2,534,850
------------
12,599,225
------------
Retail (Food) - 2.04%
190,000 General Nutrition Companies Inc.*..................... 7,932,500
------------
Retail (All Other) - 6.14%
40,000 Borders Group, Inc.*.................................. 810,000
60,000 Corporate Express Inc.*............................... 1,402,500
30,000 Micro Warehouse, Inc.*................................ 1,432,500
323,137 Staples, Inc.*........................................ 8,280,385
96,666 The Home Depot, Inc. ................................. 3,854,557
115,000 Toys 'R' Us, Inc.*.................................... 2,990,000
140,000 Viking Office Products, Inc.*......................... 5,040,000
------------
23,809,942
------------
Services - 9.50%
250,000 Activision, Inc.*..................................... 3,375,000
70,000 Ceridian Corporation*................................. 3,062,500
9,000 Computron Software Inc.*.............................. 171,000
40,000 Epic Design Technology Inc.*.......................... 1,725,000
430,000 Excalibur Technologies Corporation*................... 7,095,000
117,000 First Data Corporation................................ 6,829,875
100,000 Hummingbird Communications Ltd*....................... 3,287,500
30,000 Hyperion Software Corp.*.............................. 1,395,000
40,000 Informix Corporation*................................. 1,120,000
30,000 Oracle Systems Corporation*........................... 1,203,750
56,250 Paychex, Inc. ........................................ 2,306,250
85,500 Service Corporation International..................... 2,992,500
30,000 Sierra On-Line, Inc.*................................. 1,170,000
140,000 Staffing Resources Incorporated*...................... 1,120,000
------------
36,853,375
------------
</TABLE>
11
<PAGE>
PAINEWEBBER
GROWTH FUND
PORTFOLIO OF INVESTMENTS (CONCLUDED) AUGUST 31, 1995
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
--------- ------------
COMMON STOCKS - (CONCLUDED)
<C> <S> <C>
Telephone, Telegraph - 8.98%
40,000 AirTouch Communications*.................... $ 1,300,000
95,000 AT & T Corp................................. 5,367,500
191,250 IntelCom Group, Inc.*....................... 2,486,250
77,000 Intermedia Communications of Florida, Inc.*. 1,135,750
249,333 International CableTel Incorporated*........ 6,731,991
72,000 MFS Communications Company, Inc.*........... 3,186,000
32,000 Millicom International Cellular S.A.*....... 944,000
Mobile Telecommunications Technologies
125,000 Corp.*..................................... 3,843,750
270,000 NYNEX CableComms Group PLC*................. 4,876,875
35,000 Paging Network Incorporated*................ 1,382,500
96,000 TeleWest Communications, PLC, ADS*.......... 2,316,000
30,000 Vodafone Group PLC.......................... 1,256,250
------------
34,826,866
------------
Total Common Stocks (cost - $231,573,331)................ 345,893,416
------------
<CAPTION>
NUMBER OF
WARRANTS
---------
WARRANTS - 0.14%
<C> <S> <C>
Drugs, Medicine - 0.14%
Elan Corporation, PLC ADS* (cost -
43,819 $265,004) ................................. 536,783
------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
(000) MATURITY DATES INTEREST RATES
--------- ------------------- --------------
CORPORATE BONDS - 0.16%
<C> <S> <C> <C> <C>
Domestic Petroleum Reserves - 0.16%
$ 1,500 Garnet Resources
Corporation (cost -
$1,500,000)........... 12/21/98 9.500% 613,650
------------
CONVERTIBLE BONDS - 0.63%
Services - 0.22%
300 Sierra On-Line, Inc.+ .. 04/01/01 6.500 846,000
------------
Telephone, Telegraph - 0.41%
2,240 IntelCom Group, Inc. ... 09/17/98 8.000 1,586,592
------------
Total Convertible Bonds (cost -
$2,540,000)........................ 2,432,592
------------
U.S. GOVERNMENT OBLIGATIONS - 2.06%
8,000 United States Treasury
Bills (cost -
$7,982,228)............ 09/07/95 - 09/21/95 5.405 to 5.425 7,982,228
------------
REPURCHASE AGREEMENT - 3.18%
12,327 Repurchase agreement
dated 08/31/95 with
First Chicago Capital
Markets collateralized
by $12,780,000
U.S. Treasury Bills,
due 12/14/95; proceeds:
$12,328,986 (cost -
$12,327,000)........... 09/01/95 5.800 12,327,000
------------
Total Investments (Cost -
$256,187,563) - 95.34%............. 369,785,669
Other assets in excess of
liabilities - 4.66%................ 18,084,968
------------
Net Assets - 100.00%............... $387,870,637
============
</TABLE>
- -------
*Non-income producing
+Security exempt from registration under Rule 144A of the Securities Act of
1933. These securities may be resold in transactions exempt from registration,
normally to qualified institutional buyers.
ADS American Depository Shares
See accompanying notes to financial statements
12
<PAGE>
PAINEWEBBER
STATEMENT OF ASSETS AND LIABILITIES AUGUST 31, 1995
<TABLE>
<CAPTION>
GROWTH
& INCOME GROWTH
FUND FUND
------------ ------------
<S> <C> <C>
Assets
Investments at value (cost - $430,340,665 and
$256,187,563, respectively)....................... $508,786,811 $369,785,669
Cash............................................... -- 605,861
Receivable for investments sold.................... 4,171,745 27,332,249
Dividends and interest receivable.................. 1,330,440 266,608
Receivable for shares of beneficial interest sold.. 175,225 90,939
Other assets....................................... 27,704 228,234
------------ ------------
Total assets....................................... 514,491,925 398,309,560
------------ ------------
Liabilities
Payable for investments purchased.................. 32,321,452 8,062,800
Payable for shares of beneficial interest
repurchased....................................... 1,522,160 1,470,013
Payable to affiliates.............................. 573,273 464,437
Accrued expenses and other liabilities............. 327,164 441,673
------------ ------------
Total liabilities.................................. 34,744,049 10,438,923
------------ ------------
Net Assets
Beneficial interest shares of $0.001 par value
outstanding (unlimited amount authorized)......... 388,850,379 261,595,965
Accumulated undistributed net investment income
(loss)............................................ 12,910,318 (195,335)
Accumulated net realized gains (losses) from
investments ...................................... (458,966) 12,871,901
Net unrealized appreciation of investments......... 78,446,145 113,598,106
------------ ------------
Net assets......................................... $479,747,876 $387,870,637
============ ============
Class A:
Net assets......................................... $187,057,217 $183,958,133
------------ ------------
Shares outstanding................................. 8,306,737 8,259,462
------------ ------------
Net asset value and redemption value per share..... $22.52 $22.27
============ ============
Maximum offering price per share (net asset value
plus sales charge of 4.50% of offering price)..... $23.58 $23.32
============ ============
Class B:
Net assets......................................... $247,542,966 $152,357,371
------------ ------------
Shares outstanding................................. 11,065,771 7,076,534
------------ ------------
Net asset value and offering price per share....... $22.37 $21.53
============ ============
Class C:
Net assets......................................... $ 14,679,816 $ 20,947,586
------------ ------------
Shares outstanding................................. 651,225 929,590
------------ ------------
Net asset value, offering price and redemption
value per share................................... $22.54 $22.53
============ ============
Class D:
Net assets......................................... $ 30,467,877 $ 30,607,547
------------ ------------
Shares outstanding................................. 1,358,205 1,411,524
------------ ------------
Net asset value, offering price and redemption
value per share................................... $22.43 $21.68
============ ============
</TABLE>
See accompanying notes to financial statements
13
<PAGE>
PAINEWEBBER
STATEMENT OF OPERATIONS FOR THE YEAR ENDED AUGUST 31, 1995
<TABLE>
<CAPTION>
GROWTH
& INCOME GROWTH
FUND FUND
----------- -----------
<S> <C> <C>
Investment income:
Interest and dividends................................ $10,935,651 $ 3,850,380
----------- -----------
Expenses:
Investment advisory and administration fees........... 3,378,079 1,993,930
Service fees--Class A................................. 433,166 291,331
Service and distribution fees--Class B................ 2,488,140 879,165
Service and distribution fees--Class D................ 310,960 235,905
Transfer agency and service fees...................... 578,482 250,338
Reports and notices to shareholders................... 230,453 73,122
Custody fees.......................................... 172,013 121,456
Legal and audit fees.................................. 145,985 82,425
Federal and state registration fees................... 108,396 77,191
Trustees' fees........................................ 21,513 8,125
Reorganization expenses............................... -- 155,031
Other expenses........................................ 30,409 14,184
----------- -----------
7,897,596 4,182,203
----------- -----------
Net investment income (loss).......................... 3,038,055 (331,823)
----------- -----------
Realized and unrealized gains from investment activi-
ties:
Net realized gains from investment transactions....... 17,636,364 17,051,928
Net change in unrealized appreciation/depreciation of
investments.......................................... 52,701,413 7,109,490
----------- -----------
Net realized and unrealized gains from investment ac-
tivities............................................. 70,337,777 24,161,418
----------- -----------
Net increase in net assets resulting from operations.. $73,375,832 $23,829,595
=========== ===========
</TABLE>
See accompanying notes to financial statements
14
<PAGE>
PAINEWEBBER
GROWTH & INCOME FUND
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE YEARS ENDED
AUGUST 31,
----------------------------
1995 1994
------------- -------------
<S> <C> <C>
From operations:
Net investment income............................ $ 3,038,055 $ 5,885,251
Net realized gains from investment transactions.. 17,636,364 39,114,080
Net change in unrealized
appreciation/depreciation of investments........ 52,701,413 (55,515,214)
------------- -------------
Net increase (decrease) in net assets resulting
from operations................................. 73,375,832 (10,515,883)
------------- -------------
Dividends and distributions to shareholders from:
Net investment income--Class A................... (1,163,754) (3,856,398)
Net investment income--Class B................... (457,553) (1,961,819)
Net investment income--Class C................... (102,452) (252,881)
Net investment income--Class D................... (53,897) (271,483)
Net realized gains from investment transactions--
Class A......................................... (11,701,555) (465,992)
Net realized gains from investment transactions--
Class B......................................... (15,518,597) (609,981)
Net realized gains from investment transactions--
Class C......................................... (828,242) (23,298)
Net realized gains from investment transactions--
Class D......................................... (1,953,255) (82,066)
------------- -------------
(31,779,305) (7,523,918)
------------- -------------
From beneficial interest transactions:
Net proceeds from the sale of shares............. 30,582,369 42,483,056
Cost of shares repurchased....................... (185,758,645) (367,026,971)
Proceeds from dividends reinvested............... 29,628,162 6,947,309
------------- -------------
Net decrease in net assets from beneficial
interest transactions........................... (125,548,114) (317,596,606)
------------- -------------
Net decrease in net assets....................... (83,951,587) (335,636,407)
Net assets:
Beginning of period.............................. 563,699,463 899,335,870
------------- -------------
End of period (including undistributed net
investment income of $12,910,318 and $816,845,
respectively)................................... $ 479,747,876 $ 563,699,463
============= =============
</TABLE>
See accompanying notes to financial statements
15
<PAGE>
PAINEWEBBER
GROWTH FUND
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE YEARS ENDED
AUGUST 31,
--------------------------
1995 1994
------------ ------------
<S> <C> <C>
From operations:
Net investment loss................................ $ (331,823) $ (533,971)
Net realized gains from investment transactions.... 17,051,928 5,195,790
Net change in unrealized appreciation/depreciation
of investments.................................... 7,109,490 (2,125,984)
------------ ------------
Net increase in net assets resulting from
operations........................................ 23,829,595 2,535,835
------------ ------------
Distributions to shareholders from:
Net realized gains from investment transactions--
Class A........................................... (170,322) (6,987,744)
Net realized gains from investment transactions--
Class B........................................... (120,995) (3,876,826)
Net realized gains from investment transactions--
Class C........................................... (37,136) (1,187,915)
Net realized gains from investment transactions--
Class D........................................... (33,706) (1,156,865)
------------ ------------
(362,159) (13,209,350)
------------ ------------
From beneficial interest transactions:
Net proceeds from sale of shares................... 29,210,160 136,624,359
Proceeds from the acquisitions of PaineWebber
Communications & Technology Growth Fund and
PaineWebber Blue Chip Growth Fund (net of
reorganization costs)............................. 149,203,999 --
Cost of shares repurchased......................... (112,053,043) (68,709,767)
Proceeds from dividends reinvested................. 345,390 12,642,821
------------ ------------
Net increase in net assets from beneficial interest
transactions...................................... 66,706,506 80,557,413
------------ ------------
Net increase in net assets......................... 90,173,942 69,883,898
Net assets:
Beginning of period................................ 297,696,695 227,812,797
------------ ------------
End of period...................................... $387,870,637 $297,696,695
============ ============
</TABLE>
See accompanying notes to financial statements
16
<PAGE>
PAINEWEBBER
NOTES TO FINANCIAL STATEMENTS
ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
PaineWebber Growth & Income Fund ("Growth & Income Fund") and PaineWebber
Growth Fund ("Growth Fund") (collectively, the "Funds") are diversified series
of PaineWebber America Fund and PaineWebber Olympus Fund (the "Trusts"),
respectively. The two Trusts were organized under separate Declarations of
Trust and are registered with the Securities and Exchange Commission under the
Investment Company Act of 1940, as amended ("1940 Act"), as diversified open-
end investment companies.
Each fund offers Class A, Class B, Class C and Class D Shares. Class C shares
are available only to the trustee of the PaineWebber Savings Investment Plan on
behalf of that Plan. Each class represents interests in the same assets of the
applicable Fund, and the classes are identical except for differences in their
sales charge structure, ongoing service/distribution charges and transfer
agency expenses. In addition, Class B shares, along with their pro-rata
reinvested dividends shares, automatically convert to Class A shares
approximately six years after initial issuance. All classes of shares have
equal rights as to voting privileges, except that each class has exclusive
voting rights with respect to its service/ distribution plan.
Acquisitions of PaineWebber Blue Chip Growth Fund and PaineWebber
Communications & Technology Growth Fund--Effective as of the close of business
on August 18, 1995, PaineWebber Growth Fund ("Growth Fund") acquired all of the
net assets of PaineWebber Blue Chip Growth Fund ("Blue Chip Growth Fund") and
PaineWebber Communications & Technology Growth Fund ("Communications &
Technology Growth Fund") in tax free exchanges for shares of Growth Fund. The
acquisitions were accomplished by tax-free exchanges of 2,348,128 Class A,
1,425,501 Class B and 159,005 Class D shares of Growth Fund for 3,333,744 Class
A, 2,017,042 Class B and 224,198 Class D shares of Blue Chip Growth Fund; and
533,772 Class A, 2,011,998 Class B and 343,927 Class D shares of Growth Fund
for 969,663 Class A, 3,580,393 Class B and 616,795 Class D shares of
Communications & Technology Growth Fund outstanding on August 18, 1995. Blue
Chip Growth Fund's net assets at that date, valued at $86,500,222 including
accumulated net realized losses of $485 and net unrealized appreciation of
investments of $33,294,119, and Communications & Technology Growth Fund's net
assets at that date, valued at $62,703,777 including accumulated net realized
losses of $3,916,647 and net unrealized appreciation of investments of
$16,964,035, were combined with those of Growth Fund.
Valuation of Investments - Securities which are listed on stock exchanges are
valued at the last sales price on the day the securities are being valued or,
lacking any sales on such day, at the last available bid price. In cases where
securities are traded on more than one exchange, the securities are generally
valued on the
17
<PAGE>
PAINEWEBBER
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
exchange designated by Mitchell Hutchins Asset Management Inc. ("Mitchell
Hutchins"), an affiliate and wholly owned subsidiary of PaineWebber
Incorporated ("PaineWebber") and investment adviser, administrator and
distributor of the Funds as the primary market. Securities traded in the over-
the-counter ("OTC") market and listed on the National Association of Securities
Dealers Quotation System ("NASDAQ") are valued at the last trade price on
NASDAQ prior to the time of valuation; other OTC securities are valued at the
last bid price available in the OTC market prior to the time of valuation. The
amortized cost method of valuation generally is used to value short term debt
instruments with sixty days or less remaining to maturity. Securities and
assets for which market quotations are not readily available (including
restricted securities subject to limitations as to their sale) are valued at
fair value as determined in good faith by or under the direction of each
Trust's Board of Trustees.
Repurchase Agreements - Each Fund's custodian takes possession of the
collateral pledged for investments in repurchase agreements. The underlying
collateral is valued daily on a mark-to-market basis to ensure that the value,
including accrued interest, is at least equal to the repurchase price. In the
event of default of the obligation to repurchase, the Fund has the right to
liquidate the collateral and apply the proceeds in satisfaction of the
obligation. Under certain circumstances, in the event of default or bankruptcy
by the other party to the agreement, realization and/or retention of the
collateral may be subject to legal proceedings. Each Fund occasionally
participates in joint repurchase agreement transactions with other funds
managed by Mitchell Hutchins.
Investment Transactions and Investment Income - Investment transactions are
recorded on the trade date. Realized gains and losses on sales of investments,
futures contracts and foreign exchange transactions are calculated using the
identified cost method. Interest income is recorded on an accrual basis and
dividend income is recorded on the ex-dividend date.
Income, expenses (excluding class-specific expenses) and realized/unrealized
gains (losses) are allocated proportionately to each class of shares based upon
the relative net asset value of outstanding shares (or the value of dividend-
eligible shares, as appropriate) of each class at the beginning of the day
(after adjusting for current capital share activity of the respective classes).
Class specific expenses are charged directly to the applicable class of shares.
Futures Contracts - Each of the Funds is permitted to use financial futures
contracts to hedge its portfolio. Upon entering into a financial futures
contract, the Fund is required to pledge to the broker an amount of cash and/or
U.S. Government securities equal to a certain percentage of the contract
amount. This amount is known as the "initial margin." Subsequent payments,
known as "variation margin," are made or received by the Fund each day,
depending on the
18
<PAGE>
PAINEWEBBER
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
daily fluctuations in the value of the underlying financial futures contract.
Such variation margin is recorded for financial statement purposes on a daily
basis as unrealized gain or loss, until the financial futures contract is
closed, at which time the gain or loss is reclassified to realized.
Using financial futures contracts involves various market risks. The Fund is
subject to a number of guidelines which attempt to reduce this risk by seeking
to ensure that financial futures contracts are used solely for hedging purposes
and not for leverage. However, imperfect correlations between financial futures
and the instruments being hedged or market disruptions do not normally permit
full control of these risks at all times. Financial futures contracts in which
the Fund invests do not represent exposure to default or other credit risk. At
August 31, 1995, there were no open futures contracts.
Option Writing - When a Fund writes a call or a put option, an amount equal to
the premium received by the Fund is included in the Fund's Statements of Assets
and Liabilities as an asset and as an equivalent liability. The amount of the
liability is subsequently marked-to-market to reflect the current market value
of the option written. If an option which the Fund has written either expires
on its stipulated expiration date or the Fund enters into a closing purchase
transaction, the Fund realizes a gain (or loss if the cost of a closing
purchase transaction exceeds the premium received when the option was written)
without regard to any unrealized gain or loss on the underlying security, and
the liability related to such option is extinguished. If a call option which
the Fund has written is exercised, the Fund realizes a capital gain or loss
(long-term or short-term, depending on the holding period of the underlying
security) from the sale of the underlying security and the proceeds from the
sale are increased by the premium originally received. If a put option which
the Fund has written is exercised, the amount of the premium originally
received reduces the cost of the security which the Fund purchases upon
exercise of the option.
Certain characteristics of the futures market might increase the risk that
movements in the prices of futures contracts or related options might not
correlate perfectly with movements in the prices of the investments being
hedged. For example, all participants in the futures and related options
markets are subject to daily variation margin calls and might be compelled to
liquidate futures or related options positions whose prices are moving
unfavorably to avoid being subject to further calls. These liquidations could
increase price volatility of the instruments and distort the normal price
relationship between the futures or options and the investments being hedged.
Also, because initial margin deposit requirements in the futures market are
less onerous than margin requirements in the securities markets, there might be
increased participation by speculators in the futures markets. This
participation also might cause temporary price distortions. In addition,
activities of large traders in both the futures and securities markets
19
<PAGE>
PAINEWEBBER
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
involving arbitrage, "program trading" and other investment strategies might
result in temporary price distortions.
Federal Tax Status - Each Fund intends to distribute substantially all of its
taxable income and to comply with the other requirements of the Internal
Revenue Code applicable to regulated investment companies. Accordingly, no
provision for federal income taxes is required. In addition, by distributing
during each calendar year substantially all of its net investment income,
capital gains and certain other amounts, if any, each Fund intends not to be
subject to any federal excise tax.
The Growth Fund has a net capital loss carryforward of $3,785,329 at August 31,
1995 pursuant to its reorganization with PaineWebber Blue Chip Growth Fund and
PaineWebber Communication & Technology Growth Fund. This additional loss
carryforward is available as a reduction, to the extent provided in the
regulations, of future net capital gains realized, and will expire in 2002.
To reflect reclassifications arising from permanent "book/tax" differences for
the year ended August 31, 1995 undistributed net investment income (loss) was
increased by $136,488 and beneficial interest was decreased by $136,488.
Dividends and Distributions - Dividends and distributions to shareholders are
recorded on the ex-dividend date. The amount of dividends and distributions
from net investment income and net realized capital gains are determined in
accordance with federal income tax regulations, which may differ from generally
accepted accounting principles. These "book/tax" differences are either
considered temporary or permanent in nature. To the extent these differences
are permanent in nature, such amounts are reclassified within the capital
accounts based on their federal tax-basis treatment; temporary differences do
not require reclassifications. Dividends and distributions which exceed net
investment income and net realized capital gains for financial reporting
purposes but not for tax purposes are reported as dividends in excess of net
investment income or distributions in excess of net realized capital gains. To
the extent they exceed net investment income and net realized capital gains for
tax purposes, they are reported as distributions of paid-in-capital.
INVESTMENT ADVISER AND ADMINISTRATOR
Each of the Funds has entered into an Investment Advisory and Administration
Contract ("Advisory Contract") with Mitchell Hutchins. In accordance with the
Advisory Contract each Fund pays Mitchell Hutchins an investment advisory and
administration fee, which is accrued daily and paid monthly, in accordance with
the following schedule:
<TABLE>
<CAPTION>
GROWTH &
INCOME FUND GROWTH FUND
----------- -----------
<S> <C> <C>
As a % of Average Daily Net Assets...................... 0.700% 0.750%
</TABLE>
20
<PAGE>
PAINEWEBBER
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
At August 31, 1995, Growth & Income Fund and Growth Fund owed Mitchell Hutchins
$284,676 and $253,734, respectively, in investment advisory and administration
fees.
For the year ended August 31, 1995, Growth & Income Fund and Growth Fund paid
$65,991 and $4,200, respectively, in brokerage commissions to PaineWebber for
transactions executed on behalf of the Funds.
In compliance with applicable state securities laws, Mitchell Hutchins will
reimburse the Funds if and to the extent that the aggregate operating expenses
in any fiscal year, exclusive of taxes, distribution fees, interest, brokerage
fees and extraordinary expenses, exceed limitations imposed by various state
regulations. Currently, the most restrictive limitation applicable to the Funds
is 2.5% of the first $30 million of average daily net assets, 2.0% of the next
$70 million and 1.5% of any excess over $100 million. For the year ended August
31, 1995, no reimbursements were required pursuant to the above limitation for
any of the Funds.
DISTRIBUTION PLANS
Mitchell Hutchins is the distributor of each Fund's shares and has appointed
PaineWebber as the exclusive dealer for the sale of those shares. Under
separate plans of service/distribution pertaining to the Class A, Class B and
Class D shares ("Class A Plan", "Class B Plan" and "Class D Plan", collectively
"Plans"), each class of shares of each Fund pays Mitchell Hutchins monthly
service fees at the annual rate of up to 0.25% of the average daily net assets
of Class A, Class B and Class D shares and monthly distribution fees at the
annual rate of up to 0.75% of the average daily net assets on Class B and Class
D shares. At August 31, 1995, Growth & Income Fund and Growth Fund owed
Mitchell Hutchins $272,530 and $198,384, respectively, in service and
distribution fees.
Mitchell Hutchins also receives the proceeds of the initial sales charges paid
upon the purchase of Class A shares and the contingent deferred sales charges
paid upon certain redemptions of Class B shares. Mitchell Hutchins has informed
each Fund that for the year ended August 31, 1995, it earned the following
amounts in sales charges:
<TABLE>
<CAPTION>
GROWTH &
INCOME FUND GROWTH FUND
----------- -----------
<S> <C> <C>
Initial sales charges--Class A.......................... $ 68,358 $ 62,298
Contingent deferred sales charges--Class B.............. $1,632,389 $628,261
</TABLE>
TRANSFER AGENCY SERVICE FEES
Each Fund pays PaineWebber an annual fee of $4.00 per active PaineWebber
shareholder account for certain services not provided by the Fund's transfer
agent.
21
<PAGE>
PAINEWEBBER
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
For these services during the year ended August 31, 1995, PaineWebber earned
$219,613 and $114,163 from Growth & Income Fund and Growth Fund, respectively.
At August 31, 1995, PaineWebber was owed $16,067 and $12,319 by Growth & Income
Fund and Growth Fund, respectively, for transfer agency service fees.
INVESTMENTS IN SECURITIES
For federal income tax purposes, the cost of securities owned at August 31,
1995, was substantially the same as the cost of securities for financial
statement purposes.
At August 31, 1995, the components of net unrealized appreciation of
investments were as follows:
<TABLE>
<CAPTION>
GROWTH &
INCOME FUND GROWTH FUND
------------ ------------
<S> <C> <C>
Gross appreciation (investments having an excess of
value over cost).................................. $ 81,719,298 $123,883,234
Gross depreciation (investments having an excess of
cost over value).................................. (3,273,152) (10,285,128)
------------ ------------
Net unrealized appreciation of investments......... $ 78,446,146 $113,598,106
============ ============
For the year ended August 31, 1995, total aggregate purchases and sales of
portfolio securities, excluding short-term securities, were as follows:
<CAPTION>
GROWTH &
INCOME FUND GROWTH FUND
------------ ------------
<S> <C> <C>
Purchases.......................................... $509,193,853 $ 85,458,681
Sales.............................................. $653,971,439 $161,777,976
</TABLE>
WRITTEN OPTION ACTIVITY
Written option activity for the year ended August 31, 1995 for the Growth &
Income Fund were as follows:
<TABLE>
<CAPTION>
NUMBER OF AMOUNT OF
OPTIONS PREMIUMS
--------- ---------
<S> <C> <C>
Options outstanding at August 31, 1994..................... 1,751 $(240,683)
Options written during the year ended August 31, 1995...... 1,096 (172,916)
Options cancelled in closing purchase transactions......... (1,391) 225,583
Options expired prior to exercise.......................... (125) 14,219
Options exercised.......................................... (1,331) 173,797
------ ---------
Options outstanding at August 31, 1995..................... 0 $ 0
====== =========
</TABLE>
22
<PAGE>
PAINEWEBBER
NOTES TO FINANCIAL STATEMENTS (CONCLUDED)
SHARES OF BENEFICIAL INTEREST
There is an unlimited amount of $0.001 par value shares of beneficial interest
authorized. Transactions in shares of beneficial interest were as follows:
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C CLASS D
------------------------- ------------------------- ---------------------- ------------------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
---------- ------------- ---------- ------------- -------- ------------ ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
GROWTH & INCOME
FUND
YEAR ENDED
AUGUST 31, 1995:
Shares sold...... 406,738 $ 8,281,477 791,571 $ 16,018,352 169,458 $ 3,384,300 142,739 $ 2,898,240
Shares
repurchased..... (3,712,415) (73,393,874) (4,676,193) (92,319,141) (288,614) (5,886,102) (715,856) (14,159,528)
Dividends
reinvested...... 653,877 11,890,156 821,955 14,887,430 51,195 930,694 105,724 1,919,882
Shares converted
from Class B to
Class A......... 72,134 1,428,360 (72,367) (1,428,360) -- -- -- --
---------- ------------- ---------- ------------- -------- ------------ ---------- ------------
Net decrease..... (2,579,666) $ (51,793,881) (3,135,034) $ (62,841,719) (67,961) $ (1,571,108) (467,393) $ (9,341,406)
========== ============= ========== ============= ======== ============ ========== ============
YEAR ENDED
AUGUST 31, 1994:
Shares sold...... 484,780 $ 9,908,236 1,075,994 $ 21,913,008 165,180 $ 3,374,003 355,387 $ 7,287,809
Shares
repurchased..... (7,207,269) (147,209,194) (8,992,340) (183,225,848) (274,997) (5,620,223) (1,515,548) (30,971,706)
Dividends
reinvested...... 193,794 3,948,532 116,857 2,388,886 13,616 276,179 16,282 333,712
Shares converted
from Class B to
Class A......... 199,102 4,024,895 (199,711) (4,024,895) -- -- -- --
---------- ------------- ---------- ------------- -------- ------------ ---------- ------------
Net decrease..... (6,329,593) $(129,327,531) (7,999,200) $(162,948,849) (96,201) $ (1,970,041) (1,143,879) $(23,350,185)
========== ============= ========== ============= ======== ============ ========== ============
<CAPTION>
CLASS A CLASS B CLASS C CLASS D
------------------------- ------------------------- ---------------------- ------------------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
---------- ------------- ---------- ------------- -------- ------------ ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
GROWTH FUND
YEAR ENDED
AUGUST 31, 1995:
Shares sold...... 343,756 $ 6,797,998 593,500 $ 11,354,188 373,860 $ 7,464,597 184,507 $ 3,593,377
Shares issued in
connection with
the acquisition
of: PaineWebber
Communications &
Technology
Growth Fund..... 533,772 11,895,983 2,011,998 43,342,827 -- -- 343,927 7,464,967
PaineWebber Blue
Chip Growth
Fund........... 2,348,128 52,326,034 1,425,501 30,724,310 -- -- 159,005 3,449,878
Shares
repurchased..... (2,089,914) (41,666,293) (1,875,647) (36,501,877) (955,791) (19,621,176) (729,746) (14,263,697)
Dividends
reinvested...... 8,698 161,962 6,276 113,599 1,975 37,136 1,793 32,693
Shares converted
from Class B to
Class A......... 63,558 1,245,674 (65,425) (1,245,674) -- -- -- --
---------- ------------- ---------- ------------- -------- ------------ ---------- ------------
Net increase
(decrease)...... 1,207,998 $ 30,761,358 2,096,203 $ 47,787,373 (579,956) $(12,119,443) (40,514) $ 277,218
========== ============= ========== ============= ======== ============ ========== ============
YEAR ENDED
AUGUST 31, 1994:
Shares sold...... 1,549,566 $ 32,037,298 2,917,179 $ 58,889,602 461,518 $ 9,540,308 1,795,537 $336,157,151
Shares
repurchased..... (1,255,407) (25,558,955) (985,658) (19,234,590) (8,765) (172,621) (1,207,404) (23,743,601)
Dividends
reinvested...... 322,249 6,664,104 180,416 3,655,229 57,056 1,187,915 55,665 1,135,573
Shares converted
from Class B to
Class A......... 106,274 2,135,836 (108,639) (2,135,836) -- -- -- --
---------- ------------- ---------- ------------- -------- ------------ ---------- ------------
Net increase..... 722,682 $ 15,278,283 2,003,298 $ 41,174,405 509,809 $ 10,555,602 643,798 $ 13,549,123
========== ============= ========== ============= ======== ============ ========== ============
</TABLE>
23
<PAGE>
PAINEWEBBER
GROWTH & INCOME FUND
FINANCIAL HIGHLIGHTS
SELECTED DATA FOR A SHARE OF BENEFICIAL INTEREST OUTSTANDING
THROUGHOUT EACH PERIOD IS PRESENTED BELOW:
<TABLE>
<CAPTION>
CLASS A
-------------------------------------------------
FOR THE YEAR ENDED AUGUST 31,
-------------------------------------------------
1995 1994 1993 1992 1991
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning
of period.................. $ 20.43 $20.86 $20.48 $19.26 $15.87
-------- -------- -------- -------- --------
Net investment income....... 0.24 0.28 0.28 0.24 0.19
Net realized and unrealized
gains (losses) from
investment transactions.... 3.18 (0.41) 0.37 1.25 3.50
-------- -------- -------- -------- --------
Total increase/decrease from
investment operations...... 3.42 (0.13) 0.65 1.49 3.69
-------- -------- -------- -------- --------
Dividends from investment
income..................... (0.12) (0.27) (0.27) (0.27) (0.30)
Distributions from realized
gains on investments....... (1.21) (0.03) -- -- --
-------- -------- -------- -------- --------
Total dividends and
distributions.............. (1.33) (0.30) (0.27) (0.27) (0.30)
-------- -------- -------- -------- --------
Net asset value, end of
period..................... $ 22.52 $20.43 $20.86 $20.48 $19.26
======== ======== ======== ======== ========
Total investment return(1).. 18.30% (0.58)% 3.15% 7.78% 23.62%
======== ======== ======== ======== ========
Ratios/Supplemental Data:
Net assets, end of period
(000's).................... $187,057 $222,432 $359,073 $358,643 $232,555
Expenses to average net
assets..................... 1.19% 1.20% 1.13% 1.22% 1.42%
Net investment income to
average net assets......... 1.07% 1.29% 1.33% 1.26% 1.79%
Portfolio turnover.......... 111.27% 94.32% 36.52% 15.57% 52.00%
</TABLE>
- -------
* Annualized.
+ Commencement of offering of shares.
(1) Total investment return is calculated assuming a $1,000 investment on the
first day of each period reported, reinvestment of all dividends and
capital gain distributions at net asset value on the payable date, and a
sale at net asset value on the last day of each period reported. The
figures do not include sales charges; results for Class A and Class B
shares would be lower if sales charges were included. Total return
information for periods less than one year is not annualized.
24
<PAGE>
PAINEWEBBER
GROWTH & INCOME FUND
<TABLE>
<CAPTION>
CLASS B CLASS C
- --------------------------------------------------- ----------------------------------------
FOR THE FOR THE
FOR THE YEAR PERIOD FOR THE YEAR PERIOD
ENDED JULY 1, ENDED FEBRUARY 12,
AUGUST 31, 1991+ TO AUGUST 31, 1992+ TO
- --------------------------------------- AUGUST 31, -------------------------- AUGUST 31,
1995 1994 1993 1992 1991 1995 1994 1993 1992
- -------- -------- -------- -------- ---------- ------- ------- ------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$ 20.37 $ 20.78 $ 20.41 $19.23 $ 18.04 $ 20.42 $20.86 $20.48 $20.95
- -------- -------- -------- -------- ------- ------- ------- ------- -------
0.06 0.10 0.12 0.13 0.02 0.30 0.33 0.33 0.16
3.18 (0.37) 0.36 1.20 1.17 3.18 (0.40) 0.37 (0.49)
- -------- -------- -------- -------- ------- ------- ------- ------- -------
3.24 (0.27) 0.48 1.33 1.19 3.48 (0.07) 0.70 (0.33)
- -------- -------- -------- -------- ------- ------- ------- ------- -------
(0.03) (0.11) (0.11) (0.15) -- (0.15) (0.34) (0.32) (0.14)
(1.21) (0.03) -- -- -- (1.21) (0.03) -- --
- -------- -------- -------- -------- ------- ------- ------- ------- -------
(1.24) (0.14) (0.11) (0.15) -- (1.36) (0.37) (0.32) (0.14)
- -------- -------- -------- -------- ------- ------- ------- ------- -------
$ 22.37 $ 20.37 $ 20.78 $ 20.41 $ 19.23 $ 22.54 $20.42 $ 20.86 $ 20.48
======== ======== ======== ======== ======= ======= ======= ======= =======
17.38% (1.31)% 2.34% 6.99% 6.60% 18.66% (0.31)% 3.44% (1.15)%
======== ======== ======== ======== ======= ======= ======= ======= =======
$247,543 $289,290 $461,389 $386,275 $57,539 $14,680 $14,690 $17,005 $10,560
1.97% 1.97% 1.90% 1.97% 2.10%* 0.89% 0.90% 0.86% 0.93%*
0.29% 0.51% 0.57% 4.90% 1.18%* 1.39% 1.60% 1.62% 1.56%*
111.27% 94.32% 36.52% 15.57% 52.00% 111.27% 94.32% 36.52% 15.57%
<CAPTION>
CLASS D
- --------------------------------------
FOR THE
FOR THE YEAR PERIOD
ENDED JULY 2,
AUGUST 31, 1992+ TO
- --------------------------- AUGUST 31,
1995 1994 1993 1992
- --------- -------- --------- --------
<S> <C> <C> <C>
$ 20.42 $ 20.83 $ 20.47 $ 20.95
- -------- --------- -------- ---------
0.06 0.11 0.11 0.02
3.19 (0.38) 0.37 (0.44)
- -------- --------- -------- --------
3.25 (0.27) 0.48 (0.42)
- -------- --------- -------- --------
(0.03) (0.11) (0.12) (0.06)
(1.21) (0.03) -- --
- -------- --------- -------- --------
(1.24) (0.14) (0.12) (0.06)
- -------- --------- -------- --------
$ 22.43 $ 20.42 $ 20.83 $ 20.47
======== ========= ======== ========
17.37% (1.29)% 2.35% 2.85%
======== ========= ======== ========
$30,468 $37,287 $61,869 $13,019
1.98% 1.94% 1.87% 1.73%*
0.28% 0.54% 0.61% 0.94%*
111.27% 94.32% 36.52% 15.57%
</TABLE>
25
<PAGE>
PAINEWEBBER
GROWTH FUND
FINANCIAL HIGHLIGHTS
SELECTED DATA FOR A SHARE OF BENEFICIAL INTEREST OUTSTANDING
THROUGHOUT EACH PERIOD IS PRESENTED BELOW:
<TABLE>
<CAPTION>
CLASS A
--------------------------------------------------
FOR THE YEAR ENDED AUGUST 31,
--------------------------------------------------
1995 1994 1993 1992 1991
-------- -------- -------- -------- -------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning
of period................. $ 20.04 $ 20.60 $ 16.78 $ 17.50 $ 13.43
-------- -------- -------- -------- -------
Net investment income
(loss).................... 0.01 -- 0.07 -- 0.02
Net realized and unrealized
gains (losses) from
investment transactions... 2.25 0.51 4.37 (0.11) 4.68
-------- -------- -------- -------- -------
Net increase/decrease from
investment operations..... 2.26 0.51 4.44 (0.11) 4.70
-------- -------- -------- -------- -------
Dividends from investment
income.................... -- -- -- (0.01) (0.17)
Distributions from realized
gains on investments...... (0.03) (1.07) (0.62) (0.60) (0.46)
-------- -------- -------- -------- -------
Total dividends and
distributions............. (0.03) (1.07) (0.62) (0.61) (0.63)
-------- -------- -------- -------- -------
Net asset value, end of
period.................... $ 22.27 $ 20.04 $ 20.60 $ 16.78 $ 17.50
======== ======== ======== ======== =======
Total investment return(1). 11.28% 2.33% 26.97% (0.85)% 37.02%
======== ======== ======== ======== =======
Ratios/Supplemental Data:
Net assets, end of period
(000's)................... $183,958 $141,342 $130,353 $102,640 $96,796
Expenses to average net
assets.................... 1.28%(2) 1.21% 1.22% 1.43% 1.56%
Net investment income
(loss) to average net
assets.................... 0.19%(2) 0.06% 0.38% 0.00% 0.10%
Portfolio turnover......... 36.10% 24.41% 35.81% 32.49% 28.59%
</TABLE>
- -------
* Annualized
+ Commencement of offering of shares.
++ A per share breakdown for Class C shares has been omitted for the period
August 26, 1991 (commencement of operations) to August 31, 1991 due to
immaterial amounts.
(1) Total Investment return is calculated assuming a $1,000 investment on the
first day of each period reported, reinvestment of all dividends and
capital gain distributions at net asset value on the payable date, and a
sale at net asset value on the last day of each period reported. The
figures do not include sales charges; results for Class A and Class B
shares would be lower if sales charges were included. Total return
information for periods less than one year is not annualized.
(2) These ratios include non-recurring reorganization expenses of 0.06%, 0.06%,
0.05% and 0.06% for Class A, B, C and D, respectively.
26
<PAGE>
PAINEWEBBER
GROWTH FUND
<TABLE>
<CAPTION>
CLASS B CLASS C++
- ------------------------------------------------------ -------------------------------------
FOR THE
FOR THE YEAR PERIOD FOR THE YEAR
ENDED JULY 1, ENDED
AUGUST 31, 1991+ TO AUGUST 31,
- ----------------------------------------- AUGUST 31, -------------------------------------
1995 1994 1993 1992 1991 1995 1994 1993 1992
- -------- ------- ------- ------- ---------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$ 19.53 $ 20.25 $ 16.64 $ 17.48 $15.63 $ 20.22 $ 20.71 $ 16.83 $ 17.50
- -------- ------- ------- ------- ------ ------- ------- ------- -------
(0.02) (0.06) (0.05) (0.06) (0.02) 0.24 0.03 0.08 0.05
2.05 0.41 4.28 (0.18) 1.87 2.10 0.55 4.42 (0.11)
- -------- ------- ------- ------- ------ ------- ------- ------- -------
2.03 0.35 4.23 (0.24) 1.85 2.34 0.58 4.50 (0.06)
- -------- ------- ------- ------- ------ ------- ------- ------- -------
-- -- -- -- -- -- -- -- (0.01)
(0.03) (1.07) (0.62) (0.60) -- (0.03) (1.07) (0.62) (0.60)
- -------- ------- ------- ------- ------ ------- ------- ------- -------
(0.03) (1.07) (0.62) (0.60) -- (0.03) (1.07) (0.62) (0.61)
- -------- ------- ------- ------- ------ ------- ------- ------- -------
$ 21.53 $ 19.53 $ 20.25 $ 16.64 $17.48 $ 22.53 $ 20.22 $ 20.71 $ 16.83
======== ======= ======= ======= ====== ======= ======= ======= =======
10.40% 1.55% 25.91% (1.58)% 11.84% 11.58% 2.67% 27.26% (0.52)%
======== ======= ======= ======= ====== ======= ======= ======= =======
$152,357 $97,272 $60,280 $35,867 $3,804 $20,948 $30,521 $20,706 $11,581
2.06%(2) 2.00% 2.02% 2.20% 2.24%* 0.97%(2) 0.94% 0.95% 1.12%
(0.60)%(2) (0.66)% (0.46)% (0.70)% (0.81)%* 0.53%(2) 0.40% 0.60% 0.38%
36.10% 24.41% 35.81% 32.49% 28.59% 36.10% 24.41% 35.81% 32.49%
<CAPTION>
CLASS D
- --------------------------------------------
FOR THE
FOR THE YEAR PERIOD
ENDED JULY 2,
AUGUST 31, 1992+ TO
- -------------------------------- AUGUST 31,
1995 1994 1993 1992
- ------------ --------- --------- -----------
<C> <C> <C> <C>
$ 19.67 $ 20.38 $ 16.75 $17.04
- ------------ --------- --------- -----------
(0.10) (0.08) (0.06) (0.01)
2.14 0.44 4.31 (0.28)
- ------------ --------- --------- -----------
2.04 0.36 4.25 (0.29)
- ------------ --------- --------- -----------
-- -- -- --
(0.03) (1.07) (0.62) --
- ------------ --------- --------- -----------
(0.03) (1.07) (0.62) --
- ------------ --------- --------- -----------
$ 21.68 $ 19.67 $ 20.38 $16.75
============ ========= ========= ===========
10.37% 1.59% 25.86% (2.95)%
============ ========= ========= ===========
$30,608 $28,561 $16,474 $2,275
2.05%(2) 1.98% 2.06% 1.98%*
(0.57)%(2) (0.65)% (0.69)% (0.65)%*
36.10% 24.41% 35.81% 32.49%
</TABLE>
27
<PAGE>
PAINEWEBBER
REPORT OF INDEPENDENT AUDITORS
The Boards of Trustees and Shareholders
PaineWebber Growth & Income Fund
PaineWebber Growth Fund
We have audited the accompanying statement of assets and liabilities,
including the portfolios of investments, of the PaineWebber Growth and Income
Fund and PaineWebber Growth Fund as of August 31, 1995, and the related
statements of operations for the year then ended, the statements of changes in
net assets for each of the two years in the period then ended, and the
financial highlights for each of the periods indicated therein. These financial
statements and financial highlights are the responsibility of each Fund's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. Our procedures included confirmation of securities
owned at August 31, 1995, by correspondence with the custodians and brokers. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
PaineWebber Growth and Income Fund and PaineWebber Growth Fund at August 31,
1995 and the results of their operations for the year then ended, the changes
in their net assets for each of the two years in the period then ended, and the
financial highlights for each of the indicated periods, in conformity with
generally accepted accounting principles.
/s/ Ernst & Young LLP
New York, New York
October 23, 1995
28
<PAGE>
PAINEWEBBER
TAX INFORMATION (UNAUDITED)
We are required by Subchapter M of the Internal Revenue Code of 1986, as
amended to advise you within 60 days of each Fund's fiscal year end (August 31,
1995) as to the federal tax status of distributions received by shareholders
during such fiscal year. Accordingly, we are advising you that the following
distributions paid during the fiscal year by the Funds were derived from the
following sources:
<TABLE>
<CAPTION>
GROWTH &
INCOME GROWTH
PER SHARE DATA: FUND FUND
- --------------- -------- -------
<S> <C> <C>
Net investment income
Class A.................................................... $0.1154 --
Class B.................................................... $0.0344 --
Class C.................................................... $0.1471 --
Class D.................................................... $0.0321 --
Short-term capital gains*.................................... $0.0912 --
Long-term capital gains...................................... $1.1199 $0.0258
Percentage of ordinary income dividends qualifying for the
dividends received deduction available to corporate
shareholders................................................ 100% 100%
</TABLE>
- -------
* Taxable as ordinary income
Dividends received by tax-exempt recipients (e.g., IRAs and Keoghs) need not
be reported as taxable income. Some retirement trusts (e.g., corporate, Keogh
and 403(b)(7) plans) may need this information for their annual information
reporting.
Since each Fund's fiscal year is not the calendar year, another notification
will be sent with respect to calendar year 1995. Such notification, which will
reflect the amount to be used by calendar year taxpayers on their federal
income tax returns, will be made in conjunction with Form 1099 DIV and will be
mailed in January 1996. Shareholders are advised to consult their own tax
advisers with respect to the tax consequences of their investment in each of
the Funds.
29
